Break Away From The Pack

Why employee morals clauses can be crucial for investment firms

On Behalf of | Jun 14, 2023 | Employment Matters |

For investment professionals, reputation is everything. Clients must be able to trust you to make the best decisions for their assets. These days, that trust can disappear in minutes with one viral social media post. 

You likely remember such a post on Twitter a few years ago that showed a white woman in Central Park calling 911 on a black man who had simply asked her to leash her dog. The video, which the man (an avid bird watcher) shot on his phone, was soon all over the media. It didn’t take long for people to discover that the woman worked for a well-known investment firm and call for her to lose her job. Within days, she did. She sued her former employer, but she didn’t prevail. 

Firing a person for actions outside of work that affect your reputation and ultimately your bottom line can be tricky. Some companies use morals clauses in their employment contract to make it easier and faster to cut ties with an employee and minimize the damage they can do.

Morals clauses may not be necessary for all employees. However, those at higher levels or high-profile positions in the company have them. The investment industry is somewhat unique. All of your investment advisors have to be trusted by anyone who may step into their office for a consultation for your business to survive – let alone thrive. 

Crafting your morals clause

A morals clause needs to be clear without being too vague or too specific. Since its purpose is to protect your company, you may simply say that if they do anything inside or outside of work that could reasonably cause financial harm to the business, you have the right to terminate them.

It’s important to be clear about all potential consequences an employee who violates their morals clause could face. In addition to termination (typically without any kind of severance pay), you may say that you have a right to seek compensatory damages if you can show actual financial harm.

It’s also crucial to enforce a moral clause uniformly. Not doing so could land you on the wrong end of a lawsuit.

No two companies’ morals clauses will look exactly alike. You need to have one that’s appropriate for your business and your key employees. Having experienced legal guidance can help you create, negotiate (where applicable) and enforce a morals clause.